Manchester City Council (202222430)

REPORT

COMPLAINT 202222430

Manchester City Council

30 May 2024

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 the landlord’s:
1. The landlord’s communication about the procurement of utilities.
2. Complaint handling.

Background

The resident is a leaseholder of a 2-bedroom second floor flat in a development of mixed residential and commercial properties. The landlord is a council and the freeholder of the development. The landlord contracts the management functions to a management company that partners with a housing association. For simplicity all are referred to as the landlord in this report, other than when specific actions of the individual organisations need to be highlighted.
On 15 August 2022, the landlord wrote to leaseholders in the development. It advised the current utility contract for the communal areas was due to expire on 30 September 2022 and that it had to procure a new utility contract. It said that its energy broker would choose the new provider from a list of companies that had already been through a competitive process. For this reason, the landlord had not sought recommendations or nominations for providers from its leaseholders.
The resident emailed the landlord on 18 August 2022. He asked it to confirm the proposed changes to the utility provider did not come under Section 20 of the Landlord and Tenant Act 1985 (the Act).
The landlord responded on 25 August 2022. It stated that the rate the resident paid for electricity was currently below the threshold for a Qualifying Long-Term Agreement (QLTA) required by Section 20 of the Act. It acknowledged that the cost could increase. It said the procurement route for utilities contracts did not work with the consultation time limits set out in section 20. It was seeking to consult with leaseholders as best as it could in the spirit of the requirements of section 20. Its consultation included the letter that had explained its proposals for obtaining the new contract and its commitment to keep leaseholders informed throughout the process. It felt the resident would suffer no detriment from the process, which would allow it to secure the best deal for its customers.
The resident raised a complaint with the landlord on 20 September 2022. He said that he was not satisfied with the landlord’s response to his question. He expected it to deal with his complaint under the 4 stage complaints process (of the management company) and expected responses within the time limits required by the procedure. He listed the following stages:
1. Formal stage 1 (Management company)
2. Formal stage 2 (Panel hearing)
3. Formal stage 3 (Council)
4. Formal stage 4 (Ombudsman)
On 27 September 2022, the resident emailed the landlord. He asked it to acknowledge his complaint and provide its response by 4 October 2022. The housing association responded to his email on 30 September 2022. It said it would respond to his complaint by 14 October 2022 and provided a link to its own 2 stage complaints procedure. The resident responded the same day and highlighted that he believed his complaint was being dealt with under the 4 stage procedure of the management company. The housing association responded the same day. It apologised for including its complaint process and confirmed the resident was correct and that his complaint would be dealt with under the management company’s procedure.
The resident called the landlord on 7 October 2022. He said he had received advice from the leasehold advisory service and wanted the landlord to tell him if it was following the section 20 process for procuring utility providers.
The resident emailed the landlord on 11 October 2022. He advised he had not received the complaint response which was due on 4 October 2022. He asked it to escalate his complaint to stage 2 of the process.
The landlord provided its stage 1 response on 12 October 2022. It listed the following points:
1. The current charge the resident paid for electricity falls below the threshold for a qualifying long-term agreement under section 20 of the Act.
2. The procurement of utility providers does not work with section 20 consultation periods because it must sign on the day the deals become available to secure them.
3. It had been seeking to consult with all leaseholders as best as it could in the spirit of the requirements of section 20.
4. It acknowledged that it was not following the standard section 20 process. This was due to the reasons given and the advice it had received. It believed the direction it was taking was the most suitable and not detrimental to its customers.
5. It would be writing again in the future to update leaseholders on the new provider, contract start dates and applicable energy rates. It would also include information on the government’s energy bill relief scheme.
The resident escalated his complaint on 19 October 2022. He said:
1. In his emails he had specifically asked, “could you please confirm that these proposed changes do not come under section 20 consultation of the Landlord and Tenant Act 1985?”
2. He had not had a satisfactory or complete response to this question. He spoke to a staff member on 7 October 2022 to outline his concern. However, the stage 1 response he received after this conversation did not answer the question about section 20.
3. He had sought advice from the Department for Levelling Up Housing and Communities as well as the Leasehold Advisory Service. Both had advised that the landlord must comply with the applicable consultation procedure or apply to the First Tier Tribunal for dispensation. The landlord could not waive parts of the procedure and then claim they have complied.
4. He hoped the landlord would deal correctly with all future matters that may fall within the requirements of section 20.
5. He expected the landlord to withdraw or amend the letter sent on 15 August 2022 and apologise for providing incorrect information about the section 20 process.
The housing association acknowledged the resident’s escalation request on 25 October 2022. They stated that the management company was managing the complaint, which would be responded to by agents within the council. The housing association advised they had been asked to acknowledge his communication with the correct letterhead. They had no control over outcomes or timescales for the complaint responses. However, if he had not had a response within 15 days, he could contact them and they would pursue the complaint on his behalf. The management company sent an undated stage 2 acknowledgement letter advising it would respond by 15 November 2022.
The resident emailed the landlord on 11 November 2022. He advised it had been over 15 days since he had escalated his complaint and he had not had a response. He said he wanted to raise his complaint to stage 3.
The landlord provided its stage 2 response on 17 November 2022. It summarised the resident’s complaint and stated the following:
1. The resident had been correct it had not strictly complied with the consultation period set out in section 20 of the Act.
2. It had provided some information to leaseholders in relation to procuring new energy contracts in its letter on 15 August 2022. Nothing in that letter was incorrect. It had also committed to update leaseholders on the new contract and applicable rates.
3. It had instructed its solicitor to make an application to the First Tier Tribunal to request a dispensation from the consultation requirements of section 20.
4. It had closed his complaint as it had completed stage 2 of its complaint process. If he was not satisfied, he could contact the Housing Ombudsman.
Unhappy with the landlord’s response the resident brought his complaint to the Ombudsman on 20 December 2022.

Events since the completion of the landlord’s complaints process

The landlord did not proceed with the tribunal application as it was able to obtain a rate for electricity that was below the limit that would require consultation.
The landlord wrote to the resident on 6 February 2023 to notify him that it had entered into a new contract on 1 October 2022 for a 2 year period. The unit rates it listed benefited from the energy bill relief scheme, this could change on 1 April 2024. If the resident wanted to know what the rate would be after 1 April 2023, he could request this.

Assessment and findings

The landlord’s communication about the procurement of utilities

The law requires that leaseholders be consulted before a landlord enters into a QLTA. A QLTA is an agreement such as a utility contract, that the landlord enters into for a period greater than 12 months which would cost a leaseholder more than £100 per year. If any leaseholder must pay more than £100 per year, the landlord must consult with all leaseholders or apply to the First Tier Tribunal for permission to dispense with the consultation process. If a landlord does not consult with leaseholders, it may not be able to recover more than £100 per leaseholder towards the cost of the contract.
The landlord’s leasehold management policy states that it is accountable to its leaseholders and will consult as appropriate and in accordance with the Act. In particular, when entering into a long-term agreement with outside contractors for services that will cost more than £100 per year.
The landlord received legal advice on 1 July 2019 that clarified its responsibilities and options when obtaining a new utility contract. Its options were:
1. Use the existing agreement and either:
  1. Only charge leaseholders £100 per year, or
  2. Apply for dispensation to the First-Tier Tribunal, or
  3. Enter a contact for only 1 year.
2. Use the existing agreement, charge residents and await any challenge for lack of consultation. “This obviously carries some risk but would not prevent a dispensation application at a later date.”
3. Procure the contract and conduct the section 20 consultation as it would normally.
The landlord has maintained in its complaint responses that nothing in its letter on 15 August 2022 was incorrect. While we agree with this statement, we find that the letter did not provide the information that leaseholders required to properly understand the landlord’s actions.
The letter failed to explain the landlord’s responsibilities in relation to Section 20 of the Act and QLTA’s. It should have clearly detailed that the process it intended to follow could lead to it breaching the requirements of Section 20 depending on the unit rate and length of contract. Additionally, it did not inform residents of their right to challenge its decision in the First Tier Tribunal if they disagreed.
The resident asked the landlord whether obtaining a new utility contract was subject to the consultation process. However, the landlord’s response that it was “seeking to consult with leaseholders as best as it could in the spirit of the provisions” was ambiguous. This was a further missed opportunity for the landlord to provide a clear and definitive answer on its chosen course of action. Instead, it proceeded with its opinion that the procurement of utilities contracts was not suitable for consultation.
The landlord instructed its solicitors to apply for dispensation in November 2022. This indicates that the agreement the landlord was entering into met the criteria of a QLTA. While the application was, in the end, not required due to the costs not meeting the section 20 threshold, the process that the landlord followed lacked transparency.
Overall, it is the Ombudsman’s decision that there was service failure in the landlord’s communication about the procurement of utilities.

Complaint handling

It is unclear which complaints process was in place at the time of the resident’s complaint. From the outset the resident made the landlord aware that he was making his complaint under the 4 stage procedure operated by the management company. However, during the complaint journey the housing association was also communicating with him and detailing different response times that were in line with its own 2 stage policy.
As part of the investigation, we asked the landlord to confirm which complaint process was in place at the time of the complaint. It stated the 4 stage process was not in place and provided a copy of what it said was the relevant 2 stage policy.
The policy did not have a start date or version history. The landlord said it had brought it in after the introduction of the Housing Ombudsman Complaint Handling Code (the Code), which landlords had until 1 October 2022 to self-assess against and become compliant. However, it was unable to provide an implementation date. The policy committed to stage 1 complaints being acknowledged within 2 working days. There was no indication in the policy that stage 2 complaints would be acknowledged. The response timeframes listed were 10 working days at stage 1 and 15 working days at stage 2. These corresponded with the response timeframes in the first 2 stages of the 4 stage process the resident was following.
If, as the landlord states, the 4 stage process was not in use when the resident complained, it should have addressed this upon receipt of the stage 1 complaint. It would have been reasonable for the landlord to have contacted the resident at this point and explain what process the complaint would be following. Not doing so was a failure, which led to ongoing confusion and frustration on the part of the resident.
The uncertainty around what complaint process was in place is evidence the landlord had failed to adequately raise awareness of the relevant policy. The Code requires landlords to make their complaint policy available in a clear and accessible format, which must be easy to find on their website. We are aware the landlord has now addressed the shortcomings in its complaint policy. For this reason, we have not made orders in relation to the complaints process or policy.
It took the landlord 9 working days to acknowledge the complaint and 23 working days to provide its stage 1 response. It acknowledged the escalation request in 5 working days and responded at stage 2 in 30 working days. It did not notify the resident of a delay at either stage of the complaint, despite the resident chasing the responses at both stages. The landlord failed to acknowledge and respond to the resident’s complaint in line with its own policy or the Code.
The resident raised his complaint in relation to his dissatisfaction with the landlord’s email on 25 August 2022. It was not appropriate that it repeated the contents of this email as its stage 1 response. Doing so demonstrated a lack of willingness to engage with the complaint. Failing to answer the resident’s specific question was a missed opportunity to resolve the complaint at stage 1.
In the stage 2 response the landlord acknowledged it had not strictly complied with the section 20 consultation process. However, it did not acknowledge that it had not been transparent. This was a failure to learn from its mistakes and put things right.
Overall, it is the Ombudsman’s decision the landlord’s complaint handling amounts to maladministration.

Determination

In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was service failure in the landlord’s communication about the procurement of utilities.
In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in the landlord’s complaint handling.

Orders and recommendations

Orders

Within 4 weeks from the date of this report the landlord must:
1. Provide a written apology from a senior manager to the resident for the failures identified in this report. The landlord must ensure the apology meets the criteria highlighted in the Ombudsman’s remedies guidance amended on 17 April 2024.
2. Pay the resident a total of £230 compensation. The compensation must be paid directly to the resident and not offset against arrears. It is comprised of:
  1. £80 for the time and trouble associated with the landlord’s communication about of the new utilities contract.
  2. £150 for the distress, inconvenience, time and trouble associated with the landlord’s complaint handling.
The landlord must provide evidence of compliance with the above orders within the time limits specified.