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Southern Housing Group Limited (202305714)

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REPORT

COMPLAINT 202305714

Southern Housing Group Limited

19 July 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

  1. The resident’s complaint is about the landlord’s handling of his complaint about the reserve fund contribution.

Background

  1. The resident is a leaseholder of a flat in a building owned by the landlord. The resident is responsible for paying monthly service charges to the landlord, which includes contributions toward a reserve fund for major or cyclical works to the building.
  2. On 2 March 2022 the resident wrote to the landlord after receiving estimated charges for the year 2022–2023, and said that the bill had increased by £20 per month, with no explanation. The resident questioned why he was paying £1,200 a year to the reserve fund, given that there was around £40,000 already in the fund. The resident also raised a query regarding the communal electricity bill. In response the landlord stated that the reserve fund was only used for major works and cyclical redecorations, and the funds were therefore built up over a period of time as the works were usually costly.
  3. In April 2022 the landlord stated that a roof replacement was required within the next few years which was likely to cost more than the £44,000 already in the fund. The resident disputed that the roof repairs would be this costly and said that at least 3 quotes should be obtained. Within a letter to the resident dated 1 June 2022, the landlord said that it could not confirm the cost of the roof replacement until nearer the time of the works when quotes would be obtained. It said that the reserve fund contribution figure would therefore not be reduced.
  4. Further communication took place between the landlord and the resident about the reserve fund and communal electricity bills, and the resident raised that the landlord had failed to resolve the 2 issues properly. In September 2022 the resident raised a complaint about the landlord’s handling of his queries about charges for maintenance jobs, the communal electricity bill and the reserve fund contributions.
  5. The landlord issued its stage 1 response on 30 November 2022. It found that it had not provided the resident with a full response to his queries and said that it would do so by 2 December 2022. The landlord stated that it had recently created a home ownership team that was working through the backlog of enquiries from residents. The landlord upheld the complaint because it found that it did not respond to the reserve fund queries in a timely manner and because there was a delay in responding to the complaint. It offered the resident £25 compensation.
  6. The resident contacted the Ombudsman on 15 May 2023 and said that his concerns had not been resolved. The Ombudsman contacted the landlord in August 2023 regarding the resident’s complaint, and the complaint was escalated.
  7. The landlord issued its stage 2 complaint response on 18 August 2023. The landlord stated it was unable to reduce the reserve fund contributions due to required major works, and that it needed to be mindful of depleting the funds when planning other works. The landlord said that all 4 flats in the building were contributing the same amount to the reserve fund and that if the resident disagreed with the charges, he could go to the First-Tier Tribunal. The landlord identified that there were often delays in it responding to the resident and it offered him £250 compensation, comprised of £125 for complaint handling and £125 for inconvenience, time and trouble.
  8. The resident raised his complaint with the Ombudsman and on 30 September 2023, he stated that his outstanding issues were related to the landlord’s justification of the reserve fund contributions. He said that these were based on unrealistic estimates and without a forecasted cyclical maintenance programme.
  9. In July 2024 the resident said that in order to resolve his complaint, the landlord should improve its customer service and complaint handling, ensure that bills are based on actual estimates by local contractors and provide residents with a cyclical maintenance programme, also based on realistic estimated quotes.

Assessment and findings

Scope

  1. In accordance with paragraph 42(d) of the Housing Ombudsman Scheme, the Ombudsman may not consider complaints concerning the level of rent or service charge or the amount of a service charge increase. If the resident wishes to challenge the amount of his service charge, he may do so may making an application to the First–Tier Tribunal. However, the Ombudsman can consider the landlord’s handling of administration of service charges, its responses to the related queries and how it handled the complaint.

The resident’s questions about the reserve fund contribution.

  1. The lease obligates the leaseholder to pay service charges which includes an appropriate amount as a reserve for or towards all expenditure reasonably incurred by the landlord in connection with the repair management or maintenance of the building.
  2. The landlord’s major works and service charges guidance states that it produces a list of the planned major works it intends to carry out in the coming years, and these will usually be paid for through either the reserve fund or by invoice. The guidance says that as part of the consultation process it will inform leaseholders about the estimated cost of any work.
  3. The evidence indicates that the landlord made some efforts to respond to the resident’s initial queries from March 2022. The landlord said that quotes for planned works would be obtained as part of the Section 20 consultation and that it would then know whether the amount in the fund would cover the cost of the roof replacement.
  4. However, the landlord did not provide details of how it had calculated the annual reserve fund contribution, nor did it properly respond to the resident’s specific concerns that the contributions were too high. The landlord did not provide any details of quotes it had obtained previously for the roof repairs, which would have been appropriate. There was therefore a lack of clarity from the landlord in response to the resident’s specific queries, as well as delays in responding which meant that the resident was required to chase the landlord.
  5. The resident informed the landlord that he wished to raise a complaint on 8 September 2022. The resident contacted the landlord again on 29 October 2022 and said that he had also logged a complaint via its website but had still received no acknowledgement. The landlord acknowledged the complaint on 31 October 2022.
  6. The landlord’s complaints policy states that it will acknowledge stage 1 complaints within 5 working days and provide a full response with a further 10 working days. The landlord did not acknowledge the complaint and the resident was required to raise this on 2 further occasions. The landlord therefore did not act in accordance with the timeframes set out in its policy, which was a failing.
  7. In its November 2022 stage 1 response, the landlord said that the resident’s query had evolved and it acknowledged that it had not provided him with a full response to all of his questions. The landlord said that it had created a home ownership team in April 2022, which indicates it had taken a positive step to improve its customer service to homeowners. However, the landlord said that there was a significant backlog in responding to queries.
  8. The landlord attempted to “put things right” by offering compensation for the delays in responding to both the resident’s queries and his complaint. However, the Ombudsman considers that the £25 offered was insufficient to remedy the inconvenience caused and the time and trouble incurred by the resident in chasing the issue. Further compensation was offered at stage 2 and this has been commented on below.
  9. In its further communications to the resident after the stage 1 response, the landlord identified that the reserve fund statement was not provided for the year 2021–2022 and that this would be sent to all residents. However, the landlord did not respond to the resident’s specific queries about the reserve fund contribution and how it had been calculated. The resident responded to state that the landlord had not answered his questions and that he was requesting a fully costed review that justified the contributions.
  10. The resident chased the landlord regarding this request on 11 January 2023, and on 13 January 2023 the landlord stated that works to the roof and windows were provisionally planned for the year 2023–2024. However, the details provided of the planned works were limited and the resident continued to request a costed review. On 1 February 2023 the landlord advised the resident that it would not provide a costed review.
  11. The resident then requested a cyclical maintenance schedule for the property and was required to ask for this on 2 further occasions due to not receiving a response from the landlord. The landlord responded on 10 March 2023 and stated: “I have the majority of the information to form the Cyclical and Planned Maintenance Programme you have requested and I am currently formatting it for you and waiting on the cyclical decoration costs”. The resident expressed concern that the landlord did not have a programme in place and that it was making up figures to justify the reserve fund contribution amount. On 15 March 2023 the landlord provided the resident with a copy of its major works plan and reserve fund balances, which included an estimate for works to the roof, scheduled for 2023–2024.
  12. The resident disputed that the roof works would cost the figure estimated by the landlord and said that the landlord should seek several quotes from local roofing companies. The landlord informed the resident that its estimated costs included the costs for arranging party wall notices, Section 20 consultations, contingencies for any additional works, as well as the cost of the roof replacement. This was reiterated in the August 2023 stage 2 response. The landlord also said that the roof replacement estimate was based on a consultant report carried out in 2019, and that the resident would have the opportunity to review all estimates once the Section 20 consultation had commenced.
  13. While the Ombudsman acknowledges the resident’s point that the contributions needed to be justified by actual quotes, it was reasonable for the landlord to inform the resident that quotes would be obtained as part of the Section 20 consultation. However, the landlord should still have been able to provide clarity from the outset regarding how it had calculated the reserve fund contributions and what planned works were due to take place.
  14. The Leaseholder Association sets out best practice for landlord’s in relation to calculation of reserve fund contributions, stating that it is good practice for the landlord to produce and update a cyclical maintenance schedule, which would usually cover a 10–20-year period. This can then be used by the landlord to calculate the reserve fund contributions and also to demonstrate that the amount requested might be reasonable.
  15. Further, the Ombudsman’s Spotlight report on leasehold, shared ownership and new builds sets out the expectation that landlords should provide clear details to residents regarding items covered by the sinking fund and planned schedules for replacement/improvements. As stated above, the landlord’s own guidance says that it will produce a list of the planned major works it intends to carry out over the coming years. However, the evidence indicates that the landlord had not provided the resident with a planned maintenance schedule, and that this was only created after the resident had requested it.
  16. It is also noted that the landlord did not refer the resident to the First-Tier Tribunal until several months after he had first raised his query. Given that the resident was questioning the level and reasonableness of the reserve fund contribution, the landlord ought to have appropriately signposted him sooner. It is advised that if the resident continues to be dissatisfied with the level of contribution to the reserve fund, he may wish to seek legal advice on further challenging the issue via channels such as the First-Tier Tribunal.
  17. The above findings indicate that there was a service failure by the landlord to provide clear and timely information to the resident about the reserve fund contribution and planned major works. Where there are failings by a landlord, the Ombudsman’s role is to consider whether suitable remedies have been offered in line with the Ombudsman’s Dispute Resolution Principles: be fair, put things right, and learn from outcomes.
  18. In its stage 2 complaint response, the landlord acknowledged that there were delays in responding to the resident and it made further efforts to “put things right” by offering the resident £250 compensation. It appears that this was in addition to the £25 offered at stage 1. The total amount of £275 is in line with the Ombudsman’s remedies guidance for when there have been failings that have adversely affected the resident, and the compensation already offered is reasonable to remedy the failings identified.
  19. The landlord did not sufficiently indicate that it had “learned from outcomes”. It is noted that within an email to the resident dated 15 March 2023 the landlord said that it was looking at publishing major works plans so that information given to homeowners was transparent and clear. It also said that information currently needed to be requested from different teams which had taken time, and that it was working to improve this.
  20. However, within its stage 2 complaint response, the landlord did not set out any specific measures that had been taken or would be taken to address the failings identified. The landlord ought to have set out any actions it would take to improve its handling of queries about reserve fund contributions, its complaint handling and information given to the resident regarding scheduled major works.
  21. An order has been made below for the landlord to review its handling of the issues identified and implement any learning identified.

Determination

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was service failure by the landlord regarding its handling of the resident’s complaint about the reserve fund contribution.

Orders and recommendations

  1. Within 4 weeks, the landlord is ordered to pay the resident the £275 offered as part of the stage 1 and 2 complaint responses.
  2. Within 6 weeks, the landlord is ordered to conduct a review of its handling of the resident’s queries about the reserve fund contributions and the cyclical maintenance programme, and establish any measures that can be put in place to improve its communication with residents about these matters. The landlord should also consider its complaint handling and take steps to ensure complaints are responded to within the required timeframes. The landlord should provide the outcome of this review to the Ombudsman, and provide an explanation to the resident of any changes it will make regarding cyclical maintenance programmes and the calculation of reserve fund contributions as a result of the review.  
  3. The landlord should provide evidence of compliance with these orders to the Ombudsman within the timeframes stipulated.