London & Quadrant H T (202003850)

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REPORT

COMPLAINT 202003850

London & Quadrant H T

9 December 2020

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. Transparency of information provided by the landlord concerning the freehold of the building which the resident owns a property in
2. The information provided by the landlord regarding cladding on the building which the resident owns a property in
3. The landlord’s complaint handling

Background and Summary of Events

Background

The resident is the shared owner of the property (the property) which the complaint concerns. The resident purchased his share of the lease in March 2016.
The property is a flat situated in a purpose-built building (the building).
The freehold of the building is owned by a third-party private company (the freeholder). The landlord holds a head-lease with the freeholder and under-lease with the resident. A managing agent (the agent) manages the development and provides services on behalf of the freeholder.
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 metres (six storeys). Form EWS1 was introduced to prove to lenders that external cladding had been assessed by an expert.

Summary of events

On 21 October 2019 the landlord responded to the resident’s enquiry ‘regarding selling your shared ownership home’. The landlord directed the resident to its website for more information about the sales process but noted that the resident would need to obtain a valuation report for the property. The landlord advised the resident to choose a surveyor from its Panel to complete the valuation.
On 5 December 2019 the resident contacted the landlord to request information on the building, specifically whether it had cladding, as he wished to sell the property and was aware that cladding may be an issue. The landlord’s record of the contact documented that it passed the query to its Cladding Review Team for a response. The Ombudsman notes that the resident states that he began making enquiries regarding cladding prior to this date, however 5 December 2019 is the first record of an enquiry that the Ombudsman has been provided with.
On 2 January 2020 the landlord wrote to the resident. In summary the landlord said:
1. In recent months, some lenders, had requested ‘independent certification’ that a property met the requirements of Advice Note 14 to approve a mortgage loan. The landlord explained that ‘unfortunately in the short term at least building owners [could not] provide this certification’.
2. The resident should contact the freeholder for the building regarding certification. The landlord noted that it ‘doubted’ that the freeholder would be able to provide the resident with the information lenders required to offer a mortgage on the property.
3. While certification may not be available it did not mean that the building was unsafe. The landlord explained that it was not a legal requirement for a building to meet the requirements of Advice Note 14.
4. It acknowledged that the situation was unfortunate for the resident, however noted that it was ‘beyond [its] control’.
5. It wanted to do ‘everything [it] could to support shared owners affected by this issue’. The landlord explained that it was therefore working with other housing associations to ask the Government to step in.
The Ombudsman notes that the resident states that he did not receive the landlord’s letter dated 2 January 2020.
On 7 January 2020 the landlord emailed (the email) the resident in response to his request for ‘a cladding report’ about the building. The landlord said the ‘building [did] not have cladding’.
The resident confirmed that on receipt of the email he contacted the landlord to check that the information provided was correct. The resident reported that he was informed by the landlord that ‘if [he] received [the email] then it [was] true’. The Ombudsman has not seen any record of this conversation.
On 21 January 2020 the resident paid a surveyor £240 to carry out the open market valuation. It is not clear if the surveyor instructed by the resident was from the landlord’s Panel. The Ombudsman understands that the valuation was completed on 5 February 2020 and the report was forwarded to the landlord on or around 14 February 2020.
On 28 February 2020 the resident put the property up for sale.
The resident confirmed that in early summer 2020 an offer was received to purchase the property.
On 16 July 2020 the buyer’s lender wrote to the resident’s representative stating that in order to proceed with the sale it required a completed EWS1 form. The lender stated that the valuation recently completed had been returned with £0 value, however with a completed EWS1 form the valuation would be £225,000.
On 20 July 2020 the resident wrote to the landlord to request that it urgently provide the lender with the documentation it had requested in order to allow the sale to proceed.
On 22 July 2020 the landlord wrote to the resident. In summary the landlord said:
1. It was the freeholder’s responsibility to provide form EWS1.
2. Form EWS1 had been requested by the lender to ensure that the building met the Government’s guidance in relation to fire safety.
3. The Government’s guidance was not in place when the building was constructed. The landlord explained that the freeholder must therefore ‘now go back and undertake complex intrusive inspections’ which may result in the need for remedial works, prior to obtaining a completed EWS1 form.
4. It understood that this news would ‘probably comes as a shock and a disappointment’ to the resident. The landlord apolgoised ‘for the position’ it put the resident in. The landlord noted that cladding was a ‘national issue’ which was ‘affecting thousands of homeowners across the country’.
5. It was working with its partners in the housing sector and the Government to try and find a way forward.
6. While form EWS1 was not available for the building it did not mean that the building was unsafe. The landlord confirmed that the building:
  1. Received building control sign-off after it was built
  2. Received approval from a licensed warranty provider after it was built
  3. Had an up-to date fire risk assessment
7. If the resident had paid money to it to cover administration or application fees whilst trying to remortgage, staircase or sell the property it would refund these.
On 24 July 2020 the landlord emailed the resident following a phone call with him. In summary the landlord said:
1. Admin fees were only in relation to valuation extensions and management pack costs.
2. The resident should contact the freeholder regarding form EWS1.
3. The resident should contact its Cladding Review Team regarding the conflicting information he had been given in relation to cladding on the building.
On 25 July 2020 the resident made a ‘formal complaint’ to the landlord regarding the information it had given to him about cladding on the building in the email. In summary the resident said:
1. He had spoken with the agent who informed him that the building was the landlord’s responsibility.
2. He was shocked that he was unable to sell the property because he was not correctly informed regarding cladding on the building.
3. On 7 January 2020 he was informed by the landlord that the building had no cladding.
4. He would not have put the property up for sale if he had been correctly informed regarding cladding on the building.
5. He would like the landlord to refund all fees he had paid in relation to the sale of the property.
6. The situation had caused him ‘heartbreak’.
On 30 July 2020 the landlord acknowledged the resident’s complaint and confirmed that it would provide a response within 10 working days. The landlord asked the resident to confirmed if he had ‘any new concerns’ and the resolution he was seeking.
Later on the same day, 30 July 2020, the landlord provided its formal complaint response. In summary the landlord said:
1. It was responding at stage two of its complaint procedure.
2. It is a leaseholder of the building and therefore it did not have responsibility for the external walls of the building.
3. The responsibility for the external walls, and therefore obtaining form EWS1, rested with the freeholder ‘who may have delegated this to [the agent]’.
4. It was unsure why the agent had informed the resident it was responsible for the building; however it would contact the agent to ensure that correct information was shared in future.
5. The agent was ‘already arranging inspections for the building’.
6. It could see that on 7 January 2020 the resident was informed that the building did not have cladding. The landlord apologised for the misinformation. The landlord said that it should have directed the resident’s query regarding cladding to the freeholder as the responsible person.
7. While it provided incorrect information on 7 January 2020 it noted that it wrote to the resident on 2 January 2020 setting out that cladding was not its responsibility.
The landlord concluded by confirming that it ‘partially’ upheld the complaint as while it had given incorrect information on 7 January 2020 it had ‘also informed [the resident that it was not responsible for cladding] in subsequent correspondence’. The landlord confirmed that no compensation would be offered as it was the resident’s decision to sell the property without consulting the freeholder or the agent regarding cladding. The landlord confirmed that if the resident was not happy with its response, he may refer the matter to the Ombudsman.
As the resident was not happy with the landlord’s decision he referred the matter to the Ombudsman. Within his referral the leaseholder confirmed the outcome he was seeking, namely:
1. ‘A total refund’ of the money paid in putting the property up for sale which came to ‘£1539 plus the unknown fees from [his] solicitor’.
2. £5000 compensation for ‘emotional distress’.
3. To be allowed to place the property on the open market without having to deal with the landlord.
Within his referral the resident stated that he never received the landlord’s letter dated 2 January 2020 and that it was unreasonable that the landlord suggested that he chase the freeholder or agent for form EWS1 as he had no relationship with them. The resident stated that he was unaware that the landlord was not the freeholder of the building as information on its website sets out that the landlord is the ‘freeholder of your home’ when a person purchases a share of a leasehold property.

Assessment and Findings

Transparency of information provided by the landlord concerning the freehold of the building which the resident owns a property in

The Ombudsman has been provided with a copy of the lease agreement between the landlord and freeholder – the head lease. The head lease is granted directly from the freeholder. The head lease allows the landlord to grant under leases or sub leases for the residential properties within the building.
The Ombudsman has reviewed the lease for the property and can see that it documents that the landlord holds the property under a “superior lease”. While the resident states that he was not aware that the landlord was not the freeholder of the building, in the Ombudsman’s opinion the resident did have information, the lease, which documented that the landlord was not the freeholder.
While the Ombudsman is satisfied that the property’s lease documented that the landlord was not the freeholder of the building, the Ombudsman is concerned regarding the information published on the landlord’s website regarding lease agreements. The information states:
‘Your lease is a legal document that explains your rights and responsibilities as a leaseholder (or lessee) and the relationship between you and [the landlord] as the freeholder (or lessor) of your home’.
In the Ombudsman’s opinion the information is not sufficiently clear to document that the landlord is not always the freeholder, even when it is the ‘lessor’. The Ombudsman considers that the information may cause a leaseholder to assume that the landlord is always the freeholder.

The information provided by the landlord regarding cladding on 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 freeholder as to how and when it chooses to comply with it.
As the landlord is not the freeholder of the building it is unable to obtain certification pursuant to Advice Note 14 itself, the freeholder must do this. While the landlord cannot obtain form EWS1 itself, the Ombudsman does consider that the landlord has a responsibility in respect of the guidance. This is because the Ombudsman would expect to see pro-active engagement by the landlord with the freeholder regarding its response to the guidance, for its own benefit as a leaseholder, and for its own leaseholders.
The Ombudsman has not been provided with any evidence from the landlord, despite making a direct request to it, demonstrating that it was in contact with the freeholder or the agent in respect of the freeholder’s response to Advice Note 14, including compliance with the guidance, prior to the resident’s complaint in 2020.
The landlord states that it wrote to the resident on 2 January 2020 in response to his enquiry ‘about selling [the property]’. While the landlord has provided a copy of the letter as part of the evidence the Ombudsman cannot see that the letter is recorded on the landlord’s case log for the property as issued and further notes that the resident reports that he did not receive it. However, the Ombudsman will still comment on the letter as the landlord has relied on it as part of its response to the complaint. In the Ombudsman’s opinion it is however unsatisfactory that the letter is not documented in the case log as sent as a landlord should have systems in place to maintain accurate records to evidence its communication with its residents, and thus highlights a record keeping issue.
Within the letter the landlord explained that the resident may experience problems in selling the property due to lenders’ response to Advice Note 14. The landlord said that the resident should contact the freeholder regarding certification demonstrating compliance with Advice Note 14.
While it was appropriate for the landlord to explain the impact of Advice Note 14, in the Ombudsman’s opinion it was unreasonable for the landlord to direct the resident to the freeholder regarding certification. In the Ombudsman’s opinion the landlord should have been in a position by January 2020 to provide the resident with an update on the freeholder’s response to Advice Note 14 itself, noting that the guidance was issued in December 2018 and the prominence of the cladding issue within the housing sector and the impact on leaseholders. The Ombudsman notes this would also have been appropriate as the resident’s contract for the property, the lease, was with the landlord and not the freeholder.
Furthermore, the Ombudsman notes that in advising the resident to the contact the freeholder, the landlord did not provide any contact details. This was unhelpful.
Within his referral to the Ombudsman the resident explained that during the period under investigation he attempted to contact the freeholder directly regarding the cladding on the building. The resident stated he was unsuccessful in contacting the freeholder as he could not identify any contact details, only its registration details. As part of the investigation the Ombudsman attempted to locate the contact details for the freeholder but was not successful.
The evidence shows that after 7 January 2020 and following receipt of the email the resident decided to sell the property. The Ombudsman can see that the landlord provided incorrect information within the email regarding cladding on the building which the resident reports influenced his decision to sell the property. In the Ombudsman’s opinion the landlord’s error in providing incorrect information was unsatisfactory as it has a responsibility to ensure that it does not provide untrue or false information. Taking into account that the resident stated that he did not receive the landlord’s letter dated 2 January 2020 in the Ombudsman’s opinion it was reasonable for the resident to act on the email and to put his property on the market for sale.
The Ombudsman can see that on 16 and 22 July 2020 the agent emailed the landlord regarding fire safety and form EWS1. The agent informed the landlord that, following the completion of the EWS1 inspection of the building, it had been determined that a classification of a B2 had been issued. The agent advised that until such time as the remedial works could be carried out to ensure an adequate standard of safety it was working to ensure that all short-term interim measures identified from the EWS1 inspection were executed as soon as possible.
In response to the resident’s request for certification to demonstrate compliance with the Government’s guidance on 20 July 2020 the landlord wrote to the resident on 22 July 2020. The landlord again explained the impact of Advice Note 14 and reiterated that the responsibility for obtaining certification rested with the freeholder. In the Ombudsman’s opinion the landlord’s response was unsatisfactory. This is because the landlord’s response did not take into account the information provided by the agent and further it did not demonstrate that it was seeking to pursue the freeholder regarding compliance with the Government’s guidance. As it was clear that the lack of certification was impacting on the resident, who was the landlord’s leaseholder, the landlord should have taken ownership for getting a clear update from the freeholder on its response to the Government’s guidance.
In responding to the complaint the landlord acknowledged, and apologised, that it had provided incorrect information to the resident in the email regarding cladding on the building however it said that it had otherwise dealt with his queries appropriately as it provided correct information on 2 January 2020 and 22 July 2020. The landlord also said that it was not responsible for the collapse of the sale of the property as the resident had not consulted with the freeholder regarding the cladding prior to putting it up for sale.
While it was appropriate that the landlord acknowledged that it provided incorrect information to the resident in the email, and therefore apologised for the omission, the Ombudsman cannot see that the landlord considered the potential impact of its error on the resident and the subsequent decision he made to sell the property. In the Ombudsman’s opinion the landlord should have acknowledged that the resident did take into account the misinformation regarding cladding in deciding to sell the property, and noting that the landlord has no record documenting that it posted the letter of 2 January 2020 which contained information on cladding. The Ombudsman considers that compensation is therefore due to acknowledge the impact of the fault on the resident.
On 22 July 2020 the landlord confirmed that it would refund the resident money paid to it to cover administration or application fees. The landlord’s website confirms that this includes the ‘valuation and enquiry pack fees’ . In the Ombudsman’s opinion this was reasonable.
As resolution to the complaint the resident has requested a refund of fees paid to his solicitor in respect of the sale. While the resident reports that his decision to sell was informed by the email, the Ombudsman cannot be sure that there was no other influencing factor in his decision. Thus, the Ombudsman does not consider that the landlord should make an offer to refund the resident’s solicitor’s fees. Further, as set out above, the Ombudsman has made an order of compensation to reflect the impact of the landlord’s error on the resident.

The landlord’s complaint handling

The landlord acknowledged the resident’s complaint on 30 July 2020 and asked the resident to ‘outline’ his complaint, including ‘any new concerns’ to ‘assist [it]’ in responding. The evidence shows that despite the landlord’s request it responded to the complaint later on 30 July 2020. In the Ombudsman’s opinion this was unfair as it rescinded on its invitation to the resident to clarify his complaint and did not act as it said it would.
In the Ombudsman’s opinion it was unsatisfactory that the landlord’s response was provided at stage two of its complaint procedure, which did not include the option of an internal review. This is because it was not in keeping with the rules of natural justice to provide a fair hearing of the resident’s complaint. Most notably the landlord’s decision denied the resident the opportunity to inform the landlord that he did not receive its letter dated 2 January 2020 and therefore for it to respond to his claim.
In responding to the complaint the landlord did not recognise that the resident confirmed that he had contacted the agent regarding cladding who said it was unable to assist him. In the Ombudsman’s opinion the landlord should have picked up on this and confirmed that it would engage with the agent/ and or freeholder in order to assist the resident. The landlord therefore denied the resident a comprehensive response to his complaint, which addressed all points raised.

Determination (decision)

In accordance with paragraph 54 of the Housing Ombudsman Scheme there was:
1. No maladministration by the landlord regarding the transparency of information it provided concerning the freehold of the building which the resident owns a property in
2. Maladministration by the landlord in respect of the information it provided regarding cladding on the building which the resident owns a property in
3. Maladministration by the landlord in respect of its complaint handling

Reasons

The Ombudsman is satisfied that the property’s lease documented that the landlord was not the freeholder of the building.
The resident’s contract for the property, the lease, is with the landlord and not the freeholder. The Ombudsman would therefore expect the landlord to engage with the freeholder regarding its response to the Government’s guidance on cladding in order to inform and update the resident. The landlord has not demonstrated engagement with the freeholder, rather it signposted the resident to the freeholder to make enquiries himself. In the Ombudsman’s opinion this is unsatisfactory.
While the landlord apologised that it provided incorrect information to the resident in the email the Ombudsman cannot see that the landlord considered the potential impact of its error on the resident and the subsequent decision he made to sell the property.
The landlord’s handling of the complaint was not satisfactory as it rescinded its invitation to the resident, without notification, to clarify his complaint and raise any new concerns. Further it was also unsatisfactory as the landlord’s response was provided at stage two of its complaint procedure, which did not include the option of an internal review. The landlord’s decision denied the resident the opportunity to inform the landlord that he did not receive its letter dated 2 January 2020 and therefore for it to respond to his claim.
In responding to the complaint the landlord did not recognise that the resident confirmed that he had contacted the agent regarding cladding who said it was unable to assist him. The landlord should have picked up on this and confirmed that it would engage with the agent/ and or freeholder in order to assist the resident.

Orders and Recommendations

Orders

The landlord should pay the resident the following compensation within four weeks of the date of this report:
1. £500 for the potential impact of its error on the resident due to the misinformation contained within the email
2. £400 in respect of its unsatisfactory complaint handling
The landlord should refund the resident the administration fees he paid to it, including the valuation and enquiry pack fees, if it has not already done so, within four weeks of the date of this report.
The landlord should make enquiries with the freeholder to obtain a comprehensive update from it regarding its response to the Government’s guidance within four weeks of the date of this report, including timescales on compliance – even if provisional. On receipt of the freeholder’s update the landlord should write to the resident within two weeks.

Recommendations

The landlord should review the information on its website to ensure that it clearly explains that it may be the lessor of a property where it is not the freeholder of the building which the property is situated in.
The landlord should ensure that it pro-actively engages with the freeholder to obtain regular updates (at least every quarter) on its compliance with the Government’s guidance so that it can then relay the update to its leaseholders in this building.
The landlord should ensure that it keeps accurate records in respect of correspondence issued so that it has a contemporaneous record to rely on.