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Notting Hill Genesis (NHG) (202213630)

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REPORT

COMPLAINT 202213630

Notting Hill Genesis

08 August 2023

 

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:
    1. The resident’s challenge to the level of her service charge in previous years.
    2. The resident’s request for information about her service charges.
    3. The resident’s concerns about an increase to her service charge and her request to withhold the increase pending the outcome of its investigation into previous years’ charges.

Background

  1. The resident is the leaseholder of the property which is a first floor flat. The landlord is the freeholder and is responsible for managing the property and collecting the service charge, in accordance with the terms of the resident’s lease.
  2. In 2021, the resident contacted the landlord to query her service charges. She requested information regarding how the service charge was apportioned between properties, an explanation of the charges, and receipts to evidence the actual costs. She alleged that the landlord had committed an offence by failing to provide information, as required under sections 21 and 22 of the Landlord and Tenant Act 1985 (LTA 1985), in relation to charges levied since 2017.
  3. In February 2022, the resident received notification that her service charge would be increasing from 1 April 2022. She wrote to the landlord asking on what information it had based the estimates for the 2022/23 service charge year, given that the previous years’ accounts were not yet finalised. She also asked the landlord to explain the difference in charges between flats in the same block.
  4. The resident made a formal complaint to the landlord in May 2022. She complained about the landlord’s poor communication and failure to respond to some of her emails. She stated that the landlord had failed to provide her with information about her service charge, in breach of the requirements of the LTA 1985 and the provisions of her lease. She was frustrated that it had increased her service charges without adequate justification and explanation and asked for transparency as to how the charges had been apportioned between properties.
  5. In its complaint responses, the landlord accepted that its communication had been poor. It explained that it had formed a project group to address the concerns raised by the resident about her service charges, acknowledging that it had failed to comply with its obligations under her lease and the LTA 1985. The landlord accepted that this was an estate-wide issue and that it had identified errors in the apportionment of charges. It would remove the sinking fund charge from the current year’s accounts as it had been introduced without consultation, and the management fee charge would be amended to reflect the terms of the lease. The landlord offered the resident £225 compensation in acknowledgment of its poor communication and a delay in providing its stage two response.
  6. The resident declined the landlord’s offer of compensation, as she felt that it did not reflect the time and trouble taken to pursue her concerns. She wants the landlord to rectify the breaches of her lease and the LTA 1985 in respect of her service charge, and to provide her with the requested information.

Assessment and findings

Jurisdiction

  1. The resident raised concerns about the level of her service charges and her liability to pay. According to Paragraph 42(e) of the Housing Ombudsman Scheme, the Ombudsman is unable to consider complaints about the level of service charge, or the amount of a service charge increase. In order to obtain a binding determination on these matters, the resident would need to refer her concerns to the First-Tier Tribunal (Property Chamber) (FTT).

Scope of investigation

  1. In response to this Service’s request for information, the landlord has provided details and evidence of the action it has taken since the final complaint response. This investigation is focussed on the action taken by the landlord up to the final complaint response, including whether it responded reasonably to the resident’s concerns and what it did to put things right where service failure was identified. Where the landlord committed to take specific action as part of its resolution to the complaint, the Ombudsman will assess whether this was completed as promised when considering whether there was maladministration and what orders, if any, are appropriate.
  2. The Ombudsman is unable to provide a binding determination on whether the landlord breached the terms of the resident’s lease or the provisions of the LTA 1985. The Ombudsman cannot take action to prosecute the landlord for failure to comply with its obligations under the LTA 1985, nor can it award compensation in the form of damages for breach of contract. Should the resident wish to pursue these aspects of the complaint, she should refer her concerns to the FTT, or seek advice on prosecution. The Ombudsman can take into account the landlord’s admitted failure to comply with its legal obligations when considering whether there was maladministration and may award compensation if considered appropriate in the circumstances.

Policies, procedures, and obligations

  1. The Fourth Schedule to the resident’s lease sets out the actual or estimated costs and expenditure that the landlord may recover from the resident via the service charge. This includes, at paragraph 25, the reasonable costs incurred by the landlord in the management of the building and estate, being not less than 10% of the total service charge.
  2. The Fifth Schedule to the resident’s lease describes the calculation of the service charge, including an obligation to provide the information set out in the Schedule. The landlord must produce a signed certificate of the amount of the service charge “as soon as is reasonably practicable after the end of each of its financial years”. A copy should be made available to the resident on request, and this should include a summary of the expenses and outgoings incurred during the accounting year, together with a summary of the figures forming the basis of the service charge. The landlord must provide an account of the service charge payable by the resident “as soon as reasonably practicable after the signature of the certificate”, taking account of any payments made in advance.
  3. The lease also confirms, for the avoidance of doubt, that sections 18 to 30 of the LTA 1985 apply to the relevant provisions of the resident’s lease. Under sections 21 and 22 of the LTA 1985, tenants have a statutory right to:
    1. Request a summary of the service charge accounts from the landlord (s.21).
    2. Inspect accounts, receipts and other documents relating to the service charge summary (s.22).
  4. The landlord’s Service Charge Policy states at paragraph 3.1 that it is committed to consulting with residents on proposed service charge budgets prior to them coming into effect. It also notes that when residents require information about their service charges, it will be transparent in providing this in accordance with the LTA 1985.

Request for information about service charge

  1. According to the information provided to this investigation, the resident first requested information about her service charges in November 2021. She did not receive a response until 7 February 2022. As acknowledged by the landlord, this was an unreasonable delay.
  2. It also appears that the resident did not receive a written response to her emails of 16, 28 and 31 March 2022, 19 April 2022, and 17, 18 and 20 June 2022. Some of the landlord’s responses did not address all the issues raised. Having already acknowledged poor communication in its email of 7 February 2022, the landlord should have taken care to ensure the resident received comprehensive responses to her subsequent emails.
  3. The landlord acknowledged its poor communication in its complaint responses, apologised and offered £200 compensation. It provided information about the resident’s points of contact, and from August 2022, it provided a fortnightly update on the progress of its investigations, which was a helpful and appropriate way of ensuring regular and consistent communication with all affected residents. The Ombudsman considers that the amount of compensation offered to the resident in respect of its poor communication was appropriate in the circumstances.
  4. In its email of 7 February 2022, the landlord confirmed that the resident had a right to receive and review a summary of the service charge expenditure. It attached a breakdown of charges for the last 2 years. A copy of this information has not been provided to this Service. It noted that its finance team were preparing statements for audit by a third party, following which, costings could be sent. On 19 April 2022, after several further attempts to obtain the information, the resident made a formal request to the landlord for a summary of the service charges, stated to be in accordance with section 21 of the LTA 1985. The landlord failed to respond to this request.
  5. Although the landlord did take action following the resident’s initial contact, it did not provide the requested information, or explain the delay, and so the resident made a formal complaint on 23 May 2022. The landlord’s failure to provide the requested information, or to manage the resident’s expectations about when this would be provided, increased her frustration, and resulted in the escalation of her concerns. The landlord missed an opportunity to resolve the issues before a formal complaint was made.
  6. On investigation, the landlord identified that it had failed to provide the previous years’ actual accounts and admitted that errors had been made in the apportionment and calculation of charges. The landlord explained in its complaint responses that this was in part due to missing data as a result of a transfer of systems when the landlord took back control of the management of the estate in 2017. It admitted that it had breached the terms of the resident’s lease and failed to comply with the requirements of the LTA 1985.
  7. The landlord did acknowledge the scale of the issue and take some proportionate action to deal with it by establishing a project group, seeking legal advice, and referring previous years’ accounts to its auditors. The landlord took responsibility for its failings and took steps to put things right for residents by conducting a thorough review.
  8. The landlord initially indicated that the service charge review would take four to six weeks, and that it would provide the requested information by the end of July. At the time of the final complaint response of 12 September 2022, the landlord had still not provided actual accounts for service charge year 2020/21, explaining that this was due to the amount of work involved in reviewing the costs and apportionment since 2017. At this time, the actual accounts were almost a year overdue.
  9. Despite previous attempts to explain the service charge apportionment, the landlord identified that errors had been made and noted that legal advice had been sought, therefore it was not yet in a position to confirm the calculation. On 14 November 2022, the resident informed this Service that she had received no evidence, no data and no refund from the landlord and the landlord confirmed that this work was likely to take “several more weeks”.
  10. The landlord identified and admitted its failings in respect of its management of the resident’s service charge, the Ombudsman cannot conclude that it took proactive and adequate steps to rectify this within a reasonable timeframe. Whilst the landlord has highlighted that the work involved was significant, no evidence has been provided to this Service showing the extent of the work involved or the landlord’s communication with third parties, such as lawyers and auditors. The Ombudsman is therefore unable to assess whether the landlord took reasonable steps to conclude its investigation and notify residents of its findings in a timely manner.
  11. The Ombudsman considers that there was maladministration by the landlord in its handling of the resident’s request for information. Although the landlord identified and apologised for its failure to comply with its obligations and for its poor communication, it did not take sufficient action to address its failings within a reasonable timeframe. The failure to comply with its legal obligations and the delay in providing information the resident was entitled to should have been reflected in the offer of compensation made to the resident in the final response.

Response to concerns about increase of service charge.

  1. The Ombudsman cannot comment on the resident’s liability to pay the increase in service charge for the 2022/23 financial year, however, it can consider how the landlord responded to the concerns raised.
  2. The landlord initially explained in the stage 1 response that its estimates were based on previous years’ costs and expected expenditure. The Ombudsman considers that it could have provided a more detailed justification for increasing the charge when previous years’ accounts had not yet been finalised.
  3. It was reasonable for the landlord to encourage the resident to continue to make the requested payments for the 2022/23 service charge year whilst it conducted its investigations into previous years’ charges. The resident’s lease allows the landlord to request payments in advance for estimated expenditure. Although the landlord was aware that there may be inaccuracies in previous years’ charges, it was reasonable to continue to serve demands for payment, on the basis of the information currently available. This ensured funds were in hand to meet its repairs and maintenance obligations under the resident’s lease.
  4. Once it had identified that the sinking fund had been incorrectly applied to the 2022/23 accounts without prior consultation, the landlord acted appropriately by removing this charge and informing the resident that it intended to reissue the 2022/23 demand.
  5. Although the landlord’s communication with the resident could have been better, the Ombudsman is satisfied that, overall, its response to her concerns about the increase in service charge for 2022/23 was appropriate.

Determination

  1. In accordance with paragraph 42(e) of the Housing Ombudsman Scheme, the complaint about the level of service charge and the service charge increase is outside the Ombudsman’s jurisdiction.
  2. In accordance with paragraph 52 of the Housing Ombudsman Scheme there was maladministration by the landlord in respect of its response to the resident’s request for information about her service charges.
  3. In accordance with paragraph 52 of the Housing Ombudsman Scheme there was no maladministration by the landlord in respect of its response to the resident’s concerns about an increase to her service charge.

Orders

  1. Within four weeks of the date of this determination, the landlord is ordered to:
    1. Pay the resident the total sum of £475 compensation in recognition of the delays in providing the requested information.
      1. This comprises the £225 previously offered by the landlord (if not already paid) and the additional sum of £250.
    2. Write to the resident providing any outstanding information requested in the course of this complaint, or explaining why that information cannot yet be made available.
  2. The landlord should inform this Service that it has complied with the above Orders.